from the it's-a-sign-of-a-market dept

I was recently talking with a group of folks who were discussing an idea for a new product, which I thought was pretty compelling. However, one of the concerns raised by someone in the group was the fact that there seemed to be a few other companies already in that space, and while they weren't doing the exact same thing, there was concern that this product wouldn't be considered "new." This is an issue that comes up a lot, and one that we recently talked about in suggesting that companies need to get over the wasteful and inefficient view that everything they do has to be wholly invented from scratch. Along those lines Chris Dixon has an excellent post, which he titles: "competition is overrated," but I think he really means that fear of competition is overrated. He notes that competition in a market often means you're on the right track:

Almost every good idea has already been built. Sometimes new ideas are just ahead of their time. There were probably 50 companies that tried to do viral video sharing before YouTube. Before 2005, when YouTube was founded, relatively few users had broadband and video cameras. YouTube also took advantage of the latest version of Flash that could play videos seamlessly.

Similarly, just because there are so many companies in a market, it doesn't mean any of them are really executing well:

Other times existing companies simply didn't execute well. Google and Facebook launched long after their competitors, but executed incredibly well and focused on the right things. When Google launched, other search engines like Yahoo, Excite, and Lycos were focused on becoming multipurpose "portals" and had de-prioritized search (Yahoo even outsourced their search technology).

In fact, this succinctly reiterates a whole bunch of the points that we've discussed repeatedly over time. First, there's a big difference between ideas and execution. Just because others are in the market (and even well established), it doesn't mean you can't do a better job. It also highlights the difference between invention and innovation, where invention is just coming up with something new, but innovation is really bringing it to market successfully. Facebook and Google are both great examples of innovative companies who didn't really "invent" their initial markets.

And Dixon then brings it back to the value of imitating, on which there's now an excellent book out (which I'm still only partially through) called Copycats. Dixon points out that in being a "follower" initially, you can build off of their work:

The fact that other entrepreneurs thought the idea was good enough to build can be a positive signal. They probably went through some kind of vetting process like talking to target users and doing some market research. By launching later, you can piggyback off the work they've already done.

On top of that, I would argue that you can also avoid some of the mistakes that they make.

In the end, he points out that worrying about competitors is really usually the least of your issues as a startup:

Startups are primarly competing against indifference, lack of awareness, and lack of understanding -- not other startups. For web startups this means you should worry about users simply not coming to your site, or when they do come, hitting the BACK button.

Consider that the startup equivalent of the messages told to tons of content creators these days: that obscurity is a much bigger threat than "piracy." In the same way that "piracy" is really just "competition," those too focused on that sort of competition will often miss the more important fact that you need to find actual, real users and customers who are going to stick around.

One other point on all of this: when you limit a market to just one player (via monopolies like patents), you can actually lose out. You don't get those other players in the market that you yourself can piggyback off of as well, and there's less incentive to get the formula right. Competition is a good thing in how it drives a market, but if you're working in a startup, you shouldn't necessarily be so worried about it directly.

from the not-bad dept

We've pointed to numerous studies, at this point, that have all found that, when done right, free ebooks can greatly increase the sales of physical books (and, in some cases, even of ebooks). Here's another empirical example of that in action. Chris Anderson points us to a blog post by someone at a mid-list niche publisher, talking about how successful its experiments with "free" ebooks have been. In this case, the publisher would offer up the first book in a series as a free ebook, and found that it drove massive increases in sales:

One of our free titles was the #1 download on Amazon for the entire month of February. The subsequent sales of books 2 and 3 in the series increased by a rate of 20 to 1. For this series, digital sales are approaching 20% of the total product sales distribution and growing. With the visibility of the digital sales on Amazon, we have seen a substantial increase in print sales to the brick and mortar book chains. In this one instance, digital is driving print sales.

Basically, what this publisher realized is that with most books, obscurity is a greater threat than "piracy," and free helps deal with that:

Much of the talk by the big 6 publishers has been stress over cannibalization of print sales, or the idea of replacement sales, by ebooks. For midlist publishers such as ourselves, I believe we fight against substitution. We capture the "browser" market. If our title is not available or visible, a customer will simply substitute for another one in the genre. Free gave us the visibility that we could not purchase.

from the so-what-should-you-do dept

It's no secret at all that it's tough to become famous in the music industry. In the past, you had to hope for one of the golden lottery tickets from a major record label. Otherwise, after a few years of trying, you went back to something else instead. But is it becoming any easier these days? It seems there's some debate about that. Music Think Tank highlights some stats on artists who broke out in 2008:

Out of [those], 227 artists broke the "obscurity line" for the first time ever.

Out of the 227 first-timers, 14 artists did it own their own; approximately 106 were signed to a major; the rest were signed to indies.

Interesting stuff, right? Now, the quick conclusion here is that you still need that magical golden lottery ticket to make things work. But I'd argue that's not necessarily the case. First of all, a decade ago, how many artists could have done it "on their own"? Yes, it's a small number now, but it's a trendline that didn't even exist just a few years ago, and the opportunities to do it on your own have only increased. In fact, I'm surprised that 14 artists were able to sell 10,000 albums without a label already. That's really impressive.

And, of course, "doing it on your own" isn't necessarily the point. We're all for artists using record labels or managers or whoever makes the most sense to help them handle the business stuff -- but just the fact that they don't necessarily have to is quite impressive.

The second problem with the stat above? It assumes that album sales are the judge of the "obscurity line." That certainly may have been true in the past, but it is really becoming less and less of an issue. You don't have to sell albums to become well known, and just because you're well known, it doesn't mean you sell albums. It's not the best proxy for figuring this stuff out.

In fact, that data above came from a great (and absolutely worth reading) interview with Tom Silvermn of Tommy Boy Entertainment, and in the interview he more or less makes that very point:

Tommy Boy is more than a record company; we don't consider ourselves a record company anymore, we're much more than that. Now we're sort of a strategic artists positioning company, and our job is to take an artist from where they are in revenues to a much higher number. If we work with Artist A that's making half a million dollars a year, our goal is we take them to a million in year one, two million in year two, and three or four in year three. That's our goal. And then we take a percentage of that revenue. And we're talking about dollars, not record sales, because we may decide to give the records away, and we may only make about 10% of our money from the music and master use or 20% and the rest of it will come from touring and merch, publishing and possibly sync and other things. We'e not concerned with where the money comes from as long as it comes.

Tommy Boy is known for building brands, from Queen Latifah and Ru Paul, to De La Soul and Afrika Bambaataa, Naughty by Nature, House of Pain, so many household names now that you know. When you mention the name, you can see them; like Digital Underground, when you close your eyes, an image of who they are comes up. Coolio ... they all became significant brands, and that's what we did. Tommy Boy is itself as a significant brand. We're not just a record company. Our business always was building brands. How we used to make money was selling records; but we don't see it as the way we can make money now. It's one of the streams of revenue that we can make money from, but it's no longer the most significant or even the second most significant way we'll be making money. We can no longer be limited in how we see artists to the music domain. It's more than the music. We have to work with the artist's positioning.

Exactly. It seems like he understands completely how the industry has changed and what's happening today. Selling music, alone, is no longer the business model. It may not even be a major part of the music business model. It's much more about understanding what that artist allows you to sell. It could be music. It could be seats in a venue. It could be t-shirts. It could be instruments or music boxes or something wacky. Or maybe it's a combination of them all. And, in that world, "album sales" might not be a very good proxy for who is and who isn't obscure. If you're goal is to make a ton of money selling some of those other things, it might make the most sense to give that music away as freely as possible to get over the obscurity hurdle in order to get more people interested in buying those other things.

from the well,-good-for-them? dept

The NY Times recently had a blog post noting that the makers of an $850,000 romantic comedy called X's and O's were thrilled that their movie was widely shared on file sharing networks, because the attention it got helped land them a big DVD distribution deal, and potentially a television deal, helped along by the attention received from that file sharing. Of course, there's just one little problem. The FreakBits guys noticed that the number of downloads the movies' creators are citing are almost certainly false. Apparently some sites post fake download numbers as a part of their advertising, and the movie makers used those fake numbers. But... it seemed to get them attention to get more deals, so more power to them. No matter what, it suggests that (once again) obscurity is a much bigger problem than piracy.

from the indeed dept

Last week on the Colbert Report, Stephen Colbert did a gag about the new Cheap Trick album coming out on 8-track. I assumed it was just a joke, but apparently it's real. The band, as a little marketing gimmick is actually releasing the album as an 8-track (for you kids out there, the 8-track was a briefly popular form of cassette music, though it lived on at radio stations for years after it disappeared from public use). But, much more interesting is a quote at the end of the article about plans to offer the digital tracks at a steep discount from the typical iTunes price:

"We're kind of more worried about being ignored than being ripped off."

Indeed. This is just another way of saying that "obscurity is a bigger fear than piracy." And while such things are usually applied to new, up-and-coming artists, it's nice to see that more well known artists recognize the same formula applies to them, as well.

from the bump,-bump-away dept

We've discussed in the past how locksmiths are apparently upset that geeks online have revealed that lockpicking is really easy, but it's not just the locksmiths. It's the lock makers themselves. Wired has a fascinating article about one of the world's most well known lock picker, who makes it a practice to publicly expose how vulnerable certain locks are. Not so long ago, he and a colleague figured out how to quickly open Medeco locks, which many had considered to be the most secure locks of all -- and are used all over the world in gov't high security buildings. So how has Medeco responded? Basically by trying to ignore the guy... then to insult him and then to discount what he clearly has done. It's just like software companies who try to deny software vulnerabilities, except that it's much easier to patch some software that to patch a vulnerable lock. While many in the lock world are apparently pissed off at this guy, Marc Weber Tobias, they should be happy that he's making sure the locks are really secure. Because, you can pretty much be assured that he's not the only one doing all of this -- but the others who are figuring it out aren't talking about it, but are using the knowledge to their own advantage.

from the a-good-move,-a-little-late dept

You may recall, back in August, that the Massachusetts Bay Transportation Authority convinced a judge to ban the Defcon presentation by three MIT students, showing how weak the security was on the Boston transit system, and how easy it was to get past it. Of course, in trying to ban the talk, the MBTA only succeeded in getting a lot more attention for its own security vulnerabilities -- and, in the end, the judge lifted the gag order anyway, allowing the students to present their research.

from the yeah,-that'll-work dept

You would think after years and years of it backfiring every time some scared organization tries to shut down a talk concerning their security vulnerabilities, that people wouldn't even bother any more. But never underestimate the short-sightedness of some execs. The Massachusetts Bay Transportation Authority uses a magnetic strip card system to access the subway system in Boston. That system is not particularly secure, and some enterprising MIT students planned to demonstrate just how weak the security was on the system this weekend at the Defcon conference... until the MBTA convinced a judge to ban the presentation and demand that all copies of the presentation not be released -- which is problematic since all attendees at the conference already obtained CDs with a copy of the presentation. Also, somewhat ironically, a copy of the presentation was entered in as evidence in the case, and that copy is now publicly available as part of the court records system. Oops.

Of course, even if the court had actually been able to stop the distribution of the presentation, it's silly to think that this would have stopped the dissemination of the methods for hacking the system. The truth is that the MBTA's system uses woefully weak security, and rather than doing anything to strengthen it, it has to threaten some bright MIT students and get a court order to pretend the such security vulnerabilities don't exist. And, of course, in doing this, all the MBTA has really done is painted a huge target on its back. Perhaps it should have just focused on making its system a bit more secure instead.

from the good-job dept

We recently wrote about how NXP Semiconductor (formerly Philips Semiconductor) was suing to try to stop the publication of some research that showed some vulnerabilities in its chips used in smart cards around the world. The vulnerability itself was already widely known (though NXP denied it for a while). The good news is that a judge has denied the request, and the research will be published as originally planned. The bad news is that NXP wasted quite a lot of time denying there was a problem instead of fixing the problem -- and with this latest misguided legal stunt, made sure a lot more people knew about it.